Term Insurance Riders - All You Need To Know

Opting for the term life insurance plan with the right cover is one of your best investment instruments to safeguard your family’s financial future.

If you are the only breadwinner in your family, a term plan secures your family financially in case of your untimely death. The sum assured in a term plan ensures your family is back on their feet financially to carry on life as you have planned for them even in your absence.

So, it’s imperative to make the right decision. And, to make the right decision for your family, you must know all the various components of a term plan. One of the important components of term insurance is riders.

What Are Term Insurance Riders?

Term insurance riders are optional add-ons to widen your base plan coverage on occurrence of a rider-specific unfortunate event.

The right choice of term life insurance riders would help your family with an additional rider cover at the time of claim as per the rider plan.

What are the Term Rider Benefits?

Term riders stand out as valuable supplements to bolster the protection provided by your base term insurance plan. Here's a breakdown of the key advantages associated with term insurance riders:

Enhanced Coverage: Term riders serve as an added safeguard, extending financial security beyond the basic sum assured. They come into play in specific situations like accidental death, critical illness, disability, and more, offering increased coverage tailored to your needs.

Financial Assistance for Specific Occurrences: Each rider targets particular life events, providing targeted support when needed most. For instance, an Accidental Death Benefit Rider ensures an additional payout in the unfortunate event of death due to an accident, furnishing crucial financial aid during such unforeseen circumstances.

Tailored Protection: Flexibility is key with term insurance riders, allowing individuals to customise their coverage to suit their unique circumstances. By selecting appropriate riders, they can construct a comprehensive plan that reflects their lifestyle and addresses potential risks.

Tax Advantages: Term insurance riders may also present tax benefits. Premiums allocated to certain riders could qualify for tax deductions under Section 80C or Section 80D, depending on the rider's nature, providing additional financial incentives.

Peace of Mind: The assurance of having supplementary coverage for specific scenarios brings invaluable peace of mind. It ensures that your loved ones remain financially safeguarded amidst various challenges, fostering a sense of security for you and your family.

What Are The Different Kinds Of Term Insurance Riders?

Here's a glimpse into some prevalent types of term insurance riders and their intended purposes:

1. Accidental Death Benefit Rider This rider offers an additional payout in the event of the insured's demise resulting from an accident. It supplements the basic sum assured, providing extra financial support during such tragic circumstances. If the life assured passes away due to accidental death, the nominee is benefited from the sum assured under the term plan plus the rider plan cover. There are a few crucial points to keep in mind: The life assured may not die on the spot in case of an accident. Even in such cases, the rider cover will be paid if the life assured dies within 180 days of the occurrence of the unfortunate accident. It is important to know such details of the benefits provided under a term plan rider. As such accidents are quite unpredictable, an accidental death benefit rider should be opted by anyone who commutes or travels by personal vehicle or public transport. Or anyone who wants to provide an additional sum assured to their family in such a rider-specific accidental death.

2. Accidental Death and Disability Rider Going beyond accidental death coverage, this rider also extends protection against permanent disability caused by specified conditions. It serves as a financial cushion in cases of disability or accidental death, ensuring comprehensive coverage. In case of an accidental total and permanent disability due to the loss of hand(s), leg(s), loss of hearing in ear(s), loss of sight in eye(s), partial or total rider cover is paid as per the disability. Following table details the percentage of the rider cover given against the specific accidental disability.

3. Critical Illness Rider Upon diagnosis of a listed critical illness, this rider disburses a claim amount. It offers vital financial aid during times of medical adversity, helping alleviate the burden of treatment costs and other expenses. If the life assured is diagnosed to be suffering from a major critical illness like heart attack, cancer, stroke, major organ or marrow transplant, the insurer pays 100% of the rider sum assured on survival of 30 days post confirmation of diagnosis of the above-mentioned critical illnesses.

Often, such critical illnesses lead to life’s eventuality. However, in a case where the life assured recovers after being diagnosed with a critical illness, the rider cover comes to rescue the assured with some income. This money comes handy which can be utilised for monthly house-hold expenses or to cover medical expenses. The insurer compensates the life assured after 30 days of waiting period post confirmation of having any of the mentioned critical illnesses in the critical illness rider plan.

In today’s fast-moving life, with or without any medical history, anyone can be a victim of such life-threatening illnesses. Thus, it is advised to provide an additional protective shield with a critical illness rider. It is highly recommended to those who are unable to live a healthy lifestyle or living a stressful life.

4. Waiver of Premium In case of listed critical illness or disability, this rider waives future premiums, ensuring the continuity of the policy without financial strain on you. It safeguards the policy's validity even during challenging health circumstances. If you bought a standard term plan without the waiver of premium rider and are unable to pay future premiums due to a critical illness, illness of specific severity, or total and permanent disability due to an accident, your future premiums won’t waive off, consequently, the insurance policy terminates.

In such cases, the waiver of premium plays a crucial role.

In case of an accident or illness of specific severity as mentioned in the rider plan which causes total and permanent disability to life assured due to which the life assured is unable to continue to pay future insurance premiums, this rider helps to waive off premiums, while the policy still stays in force.

It is recommended to opt for a waiver of premium rider as it will keep the policy in force in a situation where the life assured is unable to pay future premiums due to permanent disability, critical illness, or illness of specific severity as per the rider plan.

5. Hospital Cash Rider This rider provides daily cash benefits during hospitalisation, alleviating the financial stress associated with medical bills and other incidental expenses. It offers additional financial support to cope with the costs of hospital stays. With a hospital cash rider, the insurer provides daily hospital cash benefit, ICU benefit, and recuperating benefit as a lump sum in case of hospitalisation.

It is a smart decision to opt for a hospital cash rider to cover medical treatment expenses as hospital expenses are too high nowadays. With an additional financial aid covered by such a rider at a nominal premium is comforting to the pocket in case of hospitalisation.

6. Surgical Care Rider Covering a spectrum of medically necessary surgeries, this rider disburses a lump sum benefit to you. It includes both major and minor surgical procedures, offering financial aid for essential healthcare interventions. If the life assured needs to undergo a medically necessary surgery in India for a minimum period of 24 hours hospitalisation, with surgical care rider, a lump sum benefit will be given. The coverage benefit varies for a major and minor surgery case.

The rider sum assured will be 50 times of the benefit amount chosen at the time of policy rider purchase. The minimum benefit amount is INR 3,000 and maximum INR 30,000. Therefore, the rider sum assured will be minimum INR 1,50,000 and maximum INR 15,00,000.

Few things to keep in mind about the surgical care rider are described in the following table:

You can provide a financial shield with this surgical care rider in case of major and minor surgical hospitalisation.

How Term Insurance Riders Work?

The right term plan will be the shield for your family. Adding a term plan rider strengthens that financial shield further.

Let’s understand how term plan riders work with an example.

Case 1: Simple term plan with INR 1 crore cover without any rider In case a life assured passes away in an unfortunate car accident, then the nominee or beneficiary would be provided with the sum assured, i.e. INR 1 crore. So, the life insurance company would provide INR 1 crore to the nominee.

Case 2: Term plan with INR 1 crore with INR 40 lakhs accidental death benefit rider cover In case a life assured passes away in an unfortunate car accident, then the nominee or beneficiary would be provided not only with the sum assured but also, with the accidental death benefit rider cover, i.e. INR 1 crore + INR 40 lakhs.

So, the life insurance company would provide INR 1.4 crore to the nominee.

That’s how the term insurance riders work and strengthen the shield further with additional coverage in case of a rider-specific occurrence at an affordable price. It is important to know that there are terms and conditions for each rider and rider-specific event occurrence for which the claim would be accepted.

Let’s understand different types of term insurance riders and how they work.

Points to Remember About Term Insurance Riders

When delving into term insurance riders, bear in mind the following points:

Specific Event Coverage: Term insurance riders are tailored to address particular events, so it's imperative to select riders that closely align with your potential risks and individual needs. This ensures that your coverage is comprehensive and relevant to your circumstances.

Terms and Conditions: Take the time to thoroughly understand the terms and conditions associated with each rider. Some riders may entail waiting periods, survival periods, or specific criteria for claim eligibility. Familiarising yourself with these details ensures clarity and prevents any surprises when it comes to making claims.

Affordability: While term riders enhance your coverage, it's essential to evaluate their cost and ensure they remain within your budgetary constraints. Assessing the benefits offered by each rider against the additional premium helps strike a balance between comprehensive coverage and financial feasibility.

Tenure Alignment: Keep in mind that the coverage tenure of term riders cannot exceed the duration of the base policy. It's crucial to align the durations of both the base policy and riders to guarantee continuous and synchronised protection throughout the chosen period.

Addition Only at Policy Purchase: Term riders can only be added at the time of policy purchase. Given this, carefully consider your long-term needs and potential risks when deciding on riders. Once the policy has been issued, you may not have the option to include or modify riders, emphasising the importance of thoughtful deliberation upfront.

There’s More To Term Insurance Riders: Tax Benefits*

There are numerous benefits of term insurance riders that come at an affordable premium. But there’s more to term insurance riders as they also help you in saving tax.

Tax benefits* of term life insurance riders:

1. Under Sec 80C: You can avail tax exemption under Sec 80C for the premium paid towards the accidental death benefit rider or for any other term insurance riders.

2. Under Sec 80D: You can avail tax exemption under Sec 80D for the premium paid towards the critical illness benefit rider or other health-related term insurance riders.

Opt or Not To Opt Term Insurance Riders

Term insurance riders are optional paid features to enhance your term insurance coverage in rider-specific cases. Term plan riders are not heavy on the pocket but provide additional financial shield to your family.

But adding riders to your term plan for your family to leave behind an enormous amount is a smart decision and it is often advised by financial experts.

You can always opt for a standard term insurance plan without any rider, however, god forbid, if you are diagnosed with a critical illness or suffer a permanent disability, handling such a situation would be difficult for your family to pay the premium or to cover household monthly expenses, your kid’s education, or paying a home loan without any financial support.

Thus, to ensure you have a safety net in such uncertain scenarios, a term insurance plan with riders is one of the best financial helping hands you can choose. Have any queries? Let us know. We will be more than happy to help you in clearing all your doubts regarding term insurance riders.